'DURING 2015, THE EUROPEAN COMMISSION INVESTIGATED

ALLEGATIONS THAT PEOPLE BOOKING AT DISNEYLAND

PARIS, AND ON THE CRUISES OF SOME SHIPPING LINES, PAID
SUBSTANTIALLY DIFFERENT PRICES FOR THE SAME HOLIDAY.
BRITISH AND GERMAN PASSENGERS APPEARED TO HAVE PAID
MORE THAN FRENCH CUSTOMERS

Explain the conditions that enable price discrimination to

take place(15)
What is price discrimination?

- Price discrimination is when a firm charges a different price to different

groups of consumers for an identical good or service, for reasons not
associated with costs.
- Many different forms of price discrimination can take place such as 1st
degree, 2nd degree, third degree, and the hurdle model of price
discrimination. However, for all these to take place certain conditions must
be met.
Condition 1:prevention of re-sale.
- If consumers can simply buy a product at cheaper prices and sell it on for a profit
to a consumer who would have paid a higher price then there is no price
discrimination. This re-sale could take the form of second hand shops and re-sale
ticket companies such as stub-hub. These companies capitalise on this arbitrage
and re-sell the good creating a profit. Prevention of re-sale could be enforced in
many different ways. For example students can only receive student discounts
with a legitimate student ID. Furthermore airplane and train tickets are registered
to one name and ID must be shown which certifies this.
Condition 2: identification of different
market segments.
-  If this is possible different groups have different price elasticities of
demand. Therefore the firm can charge different prices depending on the
consumers sensitivity to price changes. For example they could charge higher
for richer, inelastic consumers who continue buying no matter the price rise.
The firm continues to gain profit as long as the marginal revenue is greater
than marginal cost.
Condition 3: must be possible to identify
diff groups of customers
- To gain knowledge of different groups of PED and different individual
consume PED firms may have to gain information or market intelligence on
consumers through means such as deep data digging in cookies and browser
histories. 
3rd party price discrimination for
German and British customers.
- involves charging a different price to different groups of consumers for the same good.
These groups of consumers can be identified by particular characteristics such as age, sex,
location, time of use. Third degree price-discrimination is sometimes known as direct price
discrimination. Because a firm directly sets different prices depending on distinct groups of
consumers
 3rd degree price discrimination graph
Market a=German and British
consumers
Market b=French customers 
-bigger SN profits for market A
compared to market B
-market a is elastic demand
-market b is inelastic demand